British Columbia - Provincialcorporation tax and HSTDayarayanManagement & Consulting Services –LTD112 West.12th.Street.Nor...
What are the income tax rates in Canada for        2010?        These are the rates that an individual will use when compl...
Provincial/Territorial tax rates for 2010Under the current tax on income method, tax for all provinces (except Quebec)and ...
British Columbia - Provincialcorporation taxLower rateThe lower rate of British Columbia income tax is 2.5% effectiveDecem...
•    the income based on limits established by the particular province or       territory.The higher rate applies to all o...
($60,000 ÷ $90,000) × $78,000 =Taxable income earned in Nova Scotia                                    $60,000Subtract: In...
Provincial and territorial tax rates (except Quebec andAlberta)The following table shows the income tax rates for province...
British Columbia (BC) combined federal & provincial tax rates / 2004-2010                                                 ...
Ontario (ON) combined federal & provincial tax rates including surtaxes / 2004-2010                                       ...
Federal Income Tax Rates for Income Earned by a Canadian-Controlled Private Corporation                                   ...
reductions. In a news release dated April 7, 2009, the B. C. government announced that the SBD limit would be increased fr...
Comparison of Corporate Tax Rates 2003-2009                                Federal                       British Columbia ...
Table of Canadian Federal Tax Rates for the years 2001- 2010                                                              ...
BC Combined Federal and Provincial Income Tax Rates for Income Earned by a Canadian-                      Controlled Priva...
Small Business Income (SBI) Thresholds for Canadian-Controlled Private Corporations (CCPCs)    2008-2011                  ...
Source: Dayarayan centre of tax researchThe tax rate tables show the combined federal plus provincial/territorial marginal...
Example: the combined federal/BC marginal tax rate for a person earning $72,000 of employment income in 2009would be     ...
Standby charge benefitTaxable benefit reported on T4                                                  $4,800GST considered...
Total value of the benefit                                                    $2,400HST considered to have been collected ...
Benefits ChartThis chart indicates whether the taxable allowances and benefits discussed in this guide are subject to CPP ...
Disability-related employment benefits – non-cash        yes     no       40    yes   Discounts on merchandise and commiss...
Parking – in cash                                  yes   yes   40     yes                               Parking – non-cash...
Tool allowance                                        yes    yes    40        no                                 Tool reim...
5     Enter the home relocation loan deduction under code 37. 6     Some medical expenses are subject to GST/HST. For more...
Total average household expenditure by province                                                                           ...
GST/HST Notices-Notice 246December 2009Source: http://www.cra-arc.gc.ca/E/pub/gi/notice246/notice246-e.htmlHarmonized Sale...
October 14, 2009 and HST Notice #3 Residential Housing – New Housing Rebates andTransitional Rules for British Columbia HS...
o    Sales of non-residential real property      o    Leases of non-residential real property            General rule    ...
1. What is the proposed treatment for sales of residential housing in B.C. under aharmonized sales tax (HST)?The HST at 12...
Application of the HST to new housing5. When would the HST apply to a sale of a residential complex?Generally, the HST wou...
Yes. Since the written agreement of purchase and sale is entered into after November 18,2009, and both ownership and posse...
that ownership and possession of the house will transfer to the purchaser in May2010. Would the HST apply to the sale?No. ...
10. What is a grandparented sale of a house?Where a written agreement of purchase and sale for a newly constructed or subs...
Yes. For example, newly constructed or substantially renovated houses built by owners fortheir personal use, as well as du...
lumber and other construction materials purchased after June 30, 2010 that will be used tocomplete the construction of thi...
entered into. Reference should be made to GST/HST Policy Statement P-249, Agreementsand Novation.If a purchaser and a buil...
sale of the condominium unit if the purchaser assigns its rights under theagreement to a third party?Generally, no. Where ...
for the house, ownership and possession of the house will transfer to thepurchaser/assignee from the original builder on J...
14.4 A builder (referred to as the "original builder") and a purchaser enter into awritten agreement of purchase and sale ...
•   the original builder or a specified related party does not acquire                             or reacquire by way of ...
possession of the house being transferred under the agreement after June 2010. The saleof the house to the unrelated third...
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  1. 1. British Columbia - Provincialcorporation tax and HSTDayarayanManagement & Consulting Services –LTD112 West.12th.Street.North Vancouver British Columbia V7M1N3 CanadaTel: 1604-986-3704Fax: 1604-960-1216Web: www.dayarayan.ca Email: info@dayarayan.com
  2. 2. What are the income tax rates in Canada for 2010? These are the rates that an individual will use when completing their 2010 income tax and benefit return. The information may change during the year to reflect updates to the law. Federal tax rates for 2010 are: • 15% on the first $40,970 of taxable income, + • 22% on the next $40,971 of taxable income (on the portion of taxable income between $40,970 and $81,941), + • 26% on the next $45,080 of taxable income (on the portion of taxable income between $81,941 and $127,021), + • 29% of taxable income over $127,021. • The chart below reproduces the first calculation that has to be made on Page 2 of Schedule 1 of the tax package to calculate net federal tax. Page 1 is used to calculate federal non-refundable tax credits. Federal tax on taxable income manual calculation chart 2010 Use this column if Use this column if your Use this column if your Use this column if your taxable taxable income is more taxable income is more your taxable income income is than $40,970, but not than $81,941, but not is more $40,970 or more than $81,941 more than $127,021 than $127,021 lessEnter your taxable income 1from line 260 of your returnBase amount − 0 − 40,971 − 86,051 − 127,021 2Line 1 minus line 2 (this = = = = 3amount cannot be negative)Federal tax rate × 15% × 22% × 26% × 29% 4Multiply the amount on line = = = = 53 by the tax rate on line 4Tax on the amount from + 0 + 6,109 + 15,069 + 26,720 6line 2Add lines 5 and 6 = = = = 7 2
  3. 3. Provincial/Territorial tax rates for 2010Under the current tax on income method, tax for all provinces (except Quebec)and territories is calculated the same way as federal tax.Form 428 is used to calculate this provincial or territorial tax. Provincial orterritorial specific non-refundable tax credits are also calculated on Form 428.For complete details, see the Provincial or Territorial information and forms inyour 2009 tax package. Provincial / Territorial tax rates (combined chart) 2010 Provinces / Territories Rate(s)Newfoundland and Labrador 7.7% on the first $31,061 of taxable income, + 12.8% on the next $31,060, + 15.5% on the amount over $62,121Prince Edward Island 9.8% on the first $31,984 of taxable income, + 13.8% on the next $31,985, + 16.7% on the amount over $63,969Nova Scotia 8.79% on the first $29,590 of taxable income, + 14.95% on the next $29,590, + 16.67% on the next $33,820 + 17.5% on the amount over $93,000New Brunswick 10.12% on the first $35,707 of taxable income, + 15.48% on the next $35,708, + 16.8% on the next $44,690, + 17.95% on the amount over $116,105Quebec Contact Revenue QuébecOntario 6.05% on the first $36,848 of taxable income, + 9.15% on the next $36,850, + 11.16% on the amount over $73,698Manitoba 10.8% on the first $31,000 of taxable income, + 12.75% on the next $36,000, + 17.4% on the amount over $67,000Saskatchewan 11% on the first $40,113 of taxable income, + 13% on the next $74,497, + 15% on the amount over $114,610Alberta 10% of taxable incomeBritish Columbia 5.06% on the first $35,716 of taxable income, + 7.7% on the next $35,717, + 10.5% on the next $10,581, + 12.29% on the next $17,574, + 14.7% on the amount over $99,588Yukon 7.04% on the first $38,832 of taxable income, + 9.68% on the next $38,832, + 11.44% on the next $48,600, + 12.76% on the amount over $126,264Northwest Territories 5.9% on the first $36,885 of taxable income, + 8.6% on the next $36,887, + 12.2% on the next $46,164, + 14.05% on the amount over $119,936Nunavut 4% on the first $38,832 of taxable income, + 7% on the next $38,832, + 9% on the next $48,600, + 11.5% on the amount over $126,264 3
  4. 4. British Columbia - Provincialcorporation taxLower rateThe lower rate of British Columbia income tax is 2.5% effectiveDecember 1, 2008. The lower rate was 3.5% effective July 1,2008 and before this date it was 4.5%.The income eligible for the lower rate is determined using theBritish Columbia business limit of $400,000. The business limitwill be increased to $500,000 effective January 1, 2010.Higher rateThe higher rate of British Columbia income tax is 11% effectiveJuly 1, 2008. Before this date it was 12%. The higher rate willdecrease to; • 10.5% effective January 1, 2010; and to • 10% effective January 1, 2011.The higher rate applies to all income not eligible for the lowerrate.When the rate or the business limit changes during the taxyear, you have to base your calculation on the number of daysin the year that each rate or limit is in effect.Reporting the taxYou can use Schedule 427, British Columbia Corporation TaxCalculation, to help you calculate your British Columbia taxbefore the application of credits. You do not have to file it withthe return. See the schedule for more details.Generally, provinces and territories have two rates of income tax: the lower rateand the higher rate.The lower rate applies to either: • the income eligible for the federal small business deduction; or 4
  5. 5. • the income based on limits established by the particular province or territory.The higher rate applies to all other incomeCorporation X earned all of its income for 2009 from itspermanent establishment in Newfoundland and Labrador.Corporation X claimed the small business deduction when itcalculated its federal tax payable. The income from activebusiness carried on in Canada was $78,000.The Newfoundland and Labrador lower rate of tax is 5%. The higher rate oftax is 14%.See example 1. Corporation X calculates its Newfoundland and Labrador taxpayable as follows:Taxable income $90,000Subtract amount taxed at lower rate: $78,000Least of lines 400, 405, 410, or 425 of the return, in the small businessdeduction calculationAmount taxed at higher rate $12,000Taxes payable at the lower rate: $ 3,900$78,000 × 5% =Taxes payable at the higher rate: $ 1,680$12,000 × 14% =Newfoundland and Labrador tax payable $ 5,580When you allocate taxable income to more than one province or territory,you also have to allocate proportionally any income eligible for the smallbusiness deduction.See example 2. Corporation Y has permanent establishments in both NovaScotia and the Yukon. Its tax year runs from September 1, 2008, toAugust 31, 2009. Corporation Y claimed the small business deduction when itcalculated its federal tax payable. The lower rate of tax for Nova Scotia is 5%,and the higher rate of tax is 16%.To calculate its Nova Scotia income tax,Corporation Y does the following calculations:Taxable income allocated to Nova Scotia $60,000(from Schedule 5)Taxable income allocated to the Yukon $30,000(from Schedule 5)Total taxable income earned in Canada $90,000Least of lines 400, 405, 410, or 425 of the return, in the small $78,000business deduction calculationIncome eligible for the small business deduction attributed to Nova $52,000Scotia: 5
  6. 6. ($60,000 ÷ $90,000) × $78,000 =Taxable income earned in Nova Scotia $60,000Subtract: Income eligible for the small business deduction attributed $52,000to Nova ScotiaAmount taxed at higher rate $ 8,000Taxes payable at higher rate: $ 1,280 $8,000 × 16% =Taxes payable at lower rate: $ 2,600 $52,000 × 5% =Nova Scotia tax payable $ 3,880To calculate its Yukon income tax payable, Corporation Y would repeat thesame steps, using the rates that apply.Corporation tax ratesFederal ratesThe basic rate of Part I tax is 38% of your taxable income,28% after federal tax abatement.For Canadian-controlled private corporations claiming the smallbusiness deduction, the net tax rate before surtax* is: • 12% before January 1, 2008 • 11% effective January 1, 2008For the other corporations, the net tax rate before surtax* willdecrease as follows: • 21% before January 1, 2008 • 19.5% effective January 1, 2008 • 19% effective January 1, 2009 • 18% effective January 1, 2010 • 16.5% effective January 1, 2011 • 15% effective January 1, 2012*The corporate surtax is zero, effective January 1, 2008.Provincial or territorial ratesGenerally, provinces and territories have two rates of incometax - a lower rate and a higher rate.Lower rateThe lower rate applies to either: • the income eligible for the federal small business deduction; or • the income based on limits established by the particular province or territory.Higher rateThe higher rate applies to all other taxable income. 6
  7. 7. Provincial and territorial tax rates (except Quebec andAlberta)The following table shows the income tax rates for provincesand territories (except Quebec and Alberta, which do not havecorporation tax collection agreements with the CRA).These rates are in effect on January 1, 2010, and somemight change during 2010. Province or territory Lower rate Higher rateNewfoundland and Labrador 5% 14%Nova Scotia 5% 16%Prince Edward Island 2.1% 16%New Brunswick 5% 12%Ontario 5.5% 14%Manitoba 1% 12%Saskatchewan 4.5% 12%British Columbia 2.5% 10.5%Yukon 4% 15%Northwest Territories 4% 11.5%Nunavut 4% 12%For a table that shows the income tax rates as of January 1, 2010, for theprovinces and territories that have corporate tax collection agreements with thefederal government. Tax Brackets Rate (%) Provincial Surtax Federal (note) $10,382 to $40,970 15.00 $40,970 to $81,941 22.00 $81,941 to $127,021 26.00 $127,021 and higher 29.00 British Columbia $11,000 to $35,859 5.06 $35,859 to $71,719 7.70 $71,719 to $82,342 10.50 $82,342 to $99,987 12.29 $99,987 and higher 14.70 7
  8. 8. British Columbia (BC) combined federal & provincial tax rates / 2004-2010 Marginal Tax Rates Taxable Income Canadian Dividends Capital Gains Other Income Small Business Dividends Eligible Dividends 2004 2005 2006 2007 2008 2009 2010 2004- 2008- 2004- 2004- 2004- 2008- 2006 2007 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2006 2007 2005 2010 2005 2005 2005 2010first first first first first first first$32,476 $33,061 $33,755 $34,397 $35,016 $35,716 $35,859 11.03% 10.65% 10.35% 10.03% 4.52% 3.58% 2.83% 2.03% 3.16% 4.16% 4.52% (14.02%) (14.89%) (15.81%) (14.36%) (12.59%) 22.05% 21.30% 20.70% 20.06%over over over over over over over$32,476 $33,061 $33,755 $34,397 $35,016 $35,716 $35,859up to up to up to up to up to up to up to$35,000 $35,595 $36,378 $37,178 $37,885 $40,726 $40,970 12.58% 12.20% 11.83% 11.35% 8.40% 7.46% 6.52% 5.33% 6.46% 7.46% 8.40% (9.52%) (10.61%) (11.99%) (10.54%) (8.79%) 25.15% 24.40% 23.65% 22.70%over over over over over over over$35,000 $35,595 $36,378 $37,178 $37,885 $40,726 $40,970up to up to up to up to up to up to up to$64,954 $66,123 $67,511 $68,794 $70,033 $71,433 $71,719 15.58% 15.58% 15.33% 14.85% 15.90% 15.90% 15.27% 14.08% 15.21% 16.21% 15.90% 0.27% (0.46%) (1.84%) (0.38%) 1.29% 31.15% 31.15% 30.65% 29.70%over over over over over over over$64,954 $66,123 $67,511 $68,794 $70,033 $71,433 $71,719up to up to up to up to up to up to up to$70,000 $71,190 $72,756 $74,357 $75,769 $81,452 $81,941 16.85% 16.85% 16.55% 16.25% 19.08% 19.08% 18.33% 17.58% 18.71% 19.71% 19.08% 3.96% 3.10% 2.23% 3.68% 5.32% 33.70% 33.70% 33.10% 32.50%over over over over over over over$70,000 $71,190 $72,756 $74,357 $75,769 $81,452 $81,941up to up to up to up to up to up to up to$74,575 $75,917 $77,511 $78,984 $80,406 $82,014 $82,342 18.85% 18.85% 18.55% 18.25% 24.08% 24.08% 23.33% 22.58% 23.71% 24.71% 24.08% 9.76% 8.90% 8.03% 9.48% 11.08% 37.70% 37.70% 37.10% 36.50%over over over over over over over$74,575 $75,917 $77,511 $78,984 $80,406 $82,014 $82,342up to up to up to up to up to up to up to$90,555 $92,185 $94,121 $95,909 $97,636 $99,588 $99,987 19.85% 19.85% 19.50% 19.15% 26.58% 26.58% 25.71% 24.82% 25.95% 26.95% 26.58% 12.67% 11.65% 10.62% 12.07% 13.66% 39.70% 39.70% 39.00% 38.29%over over over over over over over$90,555 $92,185 $94,121 $95,909 $97,636 $99,588 $99,987up to up to up to up to up to up to up to$113,804 $115,739 $118,285 $120,887 $123,184 $126,264 $127,021 20.35% 20.35% 20.35% 20.35% 27.83% 27.83% 27.83% 27.83% 28.96% 29.96% 27.83% 14.11% 14.11% 14.11% 15.56% 17.13% 40.70% 40.70% 40.70% 40.70%over over over over over over over$113,804 $115,739 $118,285 $120,887 $123,184 $126,264 $127,021 21.85% 21.85% 21.85% 21.85% 31.58% 31.58% 31.58% 31.58% 32.71% 33.71% 31.58% 18.46% 18.46% 18.46% 19.91% 21.45% 43.70% 43.70% 43.70% 43.70%Marginal tax rate for dividends is a % of actual dividends received (notgrossed-up amount). BC Basic Personal Amount Tax Rate 2004 2005 2006 2007 2008 2009 2010 2004-2006 2007 2008-2010 $8,523 $8,676 $8,858 $9,027 $9,189 $9,373 $11,000 6.05% 5.70% 5.06%Source: Dayarayan centre of tax research 8
  9. 9. Ontario (ON) combined federal & provincial tax rates including surtaxes / 2004-2010 Marginal Tax Rates Taxable Income Canadian Dividends Small Business Dividends Eligible Dividends Capital Gains Other Income 2004 2005 2006 2007 2008 2009 2010 2004-2009 2010 2004-2005 2006 2007 2008 2009 2010first $33,375 first $34,010 first $34,758 first $35,488 first $36,020 first $36,848 first $37,106 2004-05 11.03% 2004-05 4.48% 2004-05 22.05% 2006 10.65% 2006 3.55% 2006 21.30% 3.16% 4.48% (6.04%) (6.69%) (7.13%) (7.71%) (6.23%) 2007-09 10.53% 2007 3.23% 2007-09 21.05% 2010 10.03% 2008-09 3.88% 2010 20.05%over $33,375 over $34,010 over $34,758 over $35,488 over $36,020 over $36,848 up over $37,106 up 2004-05 12.58% 2004-05 8.36% 2004-05 25.15%up to $35,000 up to $35,595 up to $36,378 up to $37,178 up to $37,885 to $40,726 to $40,970 2006 12.20% 2006 7.42% 7.90% 8.36% (1.55%) (2.2%) (2.63%) (3.21%) (0.32%) 2006 24.40% 2007-10 12.08% 2007-09 7.11% 2007-10 24.15%over $35,000 over $35,595 over $36,378 over $37,178 over $37,885 over $40,726 up over $40,970 upup to $58,771 up to $59,880 up to $61,206 up to $62,485 up to $63,428 to $64,882 to $65,345 15.58% 15.86% 16.65% 15.86% 8.24% 7.95% 7.52% 6.94% 9.76% 31.15%over $58,771 over $59,880 over $61,206 over $62,485 over $63,428 over $64,882 up over $65,345 upup to $66,752 up to $68,020 up to $69,517 up to $70,976 up to $72,041 to $73,698 to $74,214 16.49% 16.86% 17.81% 16.86% 9.01% 8.66% 8.14% 7.44% 10.55% 32.98%over $66,752 over $68,020 over $69,517 over $70,976 over $72,041 over $73,698 up over $74,214 upup to $69,240 up to $70,560 up to $72,102 up to $73,625 up to $74,720 to $76,440 to $76,986 17.70% 19.88% 20.82% 19.88% 12.51% 12.16% 11.64% 10.94% 14.02% 35.39%over $69,240 over $70,560 over $72,102 over $73,625 over $74,720 over $76,440 up over $76,986 upup to $70,000 up to $71,190 up to $72,756 up to $74,357 up to $75,769 to $81,452 to $81,941 19.70% 22.59% 23.82% 22.59% 14.94% 14.49% 13.81% 12.91% 16.49% 39.41%over $70,000 over $71,190 over $72,756 over $74,357 over $75,769 over $81,452 up over $81,941 upup to $113,804 up to up to up to up to to $126,264 to $127,021 21.70% 27.59% 28.82% 27.59% 20.74% 20.29% 19.61% 18.71% 22.25% 43.41% $115,739 $118,285 $120,887 $123,184over $113,804 over $115,739 over $118,285 over $120,887 over $123,184 over $126,264 over $127,021 23.20% 31.34% 32.57% 31.34% 25.09% 24.64% 23.96% 23.06% 26.57% 46.41%Marginal tax rate for dividends is a % of actual dividends received (not grossed-up amount). ON Basic Personal Amount Tax Rate 2004 2005 2006 2007 2008 2009 2010 2004-2009 2010 $8,044 $8,196 $8,377 $8,553 $8,681 $8,881 $8,943 6.05% 5.05% Source: Dayarayan centre of tax research 9
  10. 10. Federal Income Tax Rates for Income Earned by a Canadian-Controlled Private Corporation (CCPC) 2008-2011 Active Business Income Small Business Income up to General Active Business between $400,000 and Investment Income Description $400,000 Income $500,000 2008 2009 2010 2011 2008 2009 2010 2011 2008 2009 2010 2011 2008 2009 2010 2011General corporate rate 38.0 38.0 38.0 38.0 - 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0Federal abatement (10.0) (10.0) (10.0) (10.0) - (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) 28.0 28.0 28.0 28.0 - 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0Small business deduction (17.0) (17.0) (17.0) (17.0) - (17.0) (17.0) (17.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Rate reduction 0.0 0.0 0.0 0.0 - 0.0 0.0 0.0 (8.5) (9.0) (10.0) (11.5) 0.0 0.0 0.0 0.0Refundable tax 0.0 0.0 0.0 0.0 - 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.7 6.7 6.7 6.7 28.0 28.0 28.0 28.0 - 28.0 28.0 28.0 28.0 28.0 28.0 28.0 34.7 34.7 34.7 34.7 Comparison of Canada Corporate income tax rates- Federal and BC –(2003-2012) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 General/M&P/Investment 24.12 22.12 22.12 22.12 22.12 19.50 19.00 18.00 16.50 15.00 Federal(1) Small business 13.12 13.12 13.12 13.12 13.12 11.00 11.00 11.00 11.00 11.00 Investment - CCPC 35.79 35.79 35.79 35.79 35.79 34.67 34.67 34.67 34.67 34.67 General/M&P/Investment 13.50 13.50 13.50/12.00 12.00 12.00 12.00/11.00 11.00 10.50 10.00 10.00 British Columbia(2) Small business 4.50 4.50 4.50 4.50 4.50 4.50/3.50/2.50 2.50 2.50 2.50 2.50 (1) Federal: The income limit for the purposes of the small business deduction (SBD limit) has been $300,000 since 2005. The May 2, 2006 federal budget provided for a rise in the SBD limit to $400,000 effective January 1, 2007. The January 27, 2009 federal budget provides for an increase in the SBD limit to $500,000, effective January 1, 2009. The business limit must be allocated between associated corporations. The SBD is reduced progressively on a straight-line basis for CCPCs when their taxable capital used in Canada varies between $10 million and $15 million. (2) British Columbia: SBD limit: increased to $400,000 for taxation years ending after December 31, 2004. As announced in the February 19, 2008 budget, the General/M&P/Investment rate was reduced to 11% effective July 1, 2008, to 10.5% effective January 1, 2010 and to 10% effective January 1, 2011. In addition, the rate for small businesses was reduced to 3.5% effective July 1, 2008, to 3% effective January 1, 2010 and to 2.5% effective January 1, 2011. On October 23, 2008, the government brought down its Economic Update which proposed a further decrease in the rate for small businesses, from 3.5% to 2.5% effective December 1, 2008. The February 17, 2009 budget confirmed the previously announced rate 10
  11. 11. reductions. In a news release dated April 7, 2009, the B. C. government announced that the SBD limit would be increased from $400,000 to$500,000 on January 1, 2010. Standard deduction Additional Married Married Additional Head of Qualifying Amount if Year Single Filing Filing Dependent Amount if Personal Exemption Household Widow/Widower age 65 or Joint Separately Blind older $850 - 2005 $5,350 $7,850 $10,700 $5,350 $10,700 $1,050 $1,050 $3,400 $5,350 $850 - 2006 $5,150 $7,550 $10,300 $5,150 $10,300 $1,000 $1,000 $3,300 $5,150 $850 - 2007 $5,350 $7,850 $10,700 $5,350 $10,700 $1,050 $1,050 $3,400 $5,350 $900 - $1,050 / $1,050 / 2008 $5,450 $8,000 $10,900 $5,450 $10,900 $3,500 $5,450 $1,350 (1) $1,350 (1) $950 - $1,100 / $1,100 / 2009 $5,700 $8,350 $11,400 $5,700 $11,400 $3,650 $5,700 $1,400 (2) $1,400 (2) (1) $1,050 (for married filing joint, married filing separately, or qualifying widow); $1,350 (for single and head of household) (2) $1,100 (for married filing joint, married filing separately, or qualifying widow); $1,400 (for single and head of household) 11
  12. 12. Comparison of Corporate Tax Rates 2003-2009 Federal British Columbia Top marginal rate year Investments Capital Other Income General SBD M&P General/M&P SBD Dividends (CCPC) Gain 2003 24.12 13.12 22.12 35.79 13.50 4.50 21.85 31.58 43.70 2004 22.12 13.12 22.12 35.79 13.50 4.50 21.85 31.58 43.70 2005 22.12 13.12 22.12 35.79 13.50 4.50 21.85 31.58 43.70 2006 22.12 13.12 22.12 35.79 12.00 4.50 21.85 - 43.70 2007 22.12 13.12 22.12 35.79 12.00 4.50 18.47 31.58 43.70 2008 20.59 11.50 20.59 34.67 12.00 4.50 21.85 31.58 43.70 2009 20.00 11.00 20.00 34.67 12.00 4.50 21.85 32.71 43.70 Deferred Income Plans - Maximum Contributions Year RRSP(1) RPP(2) 1995 $14,500 $15,500 1996-2002 $13,500 $13,500 2003 $14,500 $15,500 2004 $15,500 $16,500 2005 $16,500 $18,000 2006 $18,000 $19,000 2007 $19,000 $20,000 2008 $20,000 $21,000 2009 $21,000 $22,000 2010 $22,000 -(1) RRSP: Registered Retirement Savings Plan(2) RPP: Registered Pension Plan 12
  13. 13. Table of Canadian Federal Tax Rates for the years 2001- 2010 2006 2007 2010 Portion 2001 2002 2003 2004 2005 2008 20091st portion of taxable income $30,754 $31,677 $32,183 $35,000 $35,595 $36,378 $37,178 $37,885 $40,726 $40,970Applicable Rate 16.00% 16.00% 16.00% 16.00% 15.00% 15.25% 15.00% 15.00% 15.00% 15.00%Next portion of taxable $40,971income $30,755 $31,677 $32,185 $35,000 $35,595 $36,378 $37,179 $37,884 $40,726Applicable Rate 22.00% 22.00% 22.00% 22.00% 22.00% 22.00% 22.00% 22.00% 22.00% 22.00%Next portion of taxable $45,080income $38,491 $39,646 $40,280 $43,804 $44,549 $45,529 $46,530 $47,415 $44,812Applicable Rate 26.00% 26.00% 26.00% 26.00% 26.00% 26.00% 26.00% 26.00% 26.00% 26.00%On the amount over $100,000 $103,000 $104,648 $113,804 $115,739 $118,285 $120,887 $123,184 $126,264 $127,021Applicable Rate 29.00% 29.00% 29.00% 29.00% 29.00% 29.00% 29.00% 29.00% 29.00% 29.00% Source: Dayarayan centre of tax research Table of Individual Income Tax Rates for the Province of British Columbia / 2001- 2010 Portion 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 st1 portion of taxable income $30,484 $31,124 $31,653 $32,476 $33,061 $33,755 $34,397 $35,016 $35,716 $35,859Applicable Rate 7.30% 6.05% 6.05% 6.05% 6.05% 6.05% 5.70% 5.06% 5.06% 5.06%Next portion of taxable income $30,485 $31,125 $31,655 $32,478 $33,062 $33,756 $34,397 $35,017 $35,717 $35,860Applicable Rate 10.50% 9.15% 9.15% 9.15% 9.15% 9.15% 8.65% 7.70% 7.70% 7.70%Next portion of taxable income $9,031 $9,221 $9,377 $9,621 $9,794 $10,000 $10,190 $10,373 $10,581 $10,623Applicable Rate 13.70% 11.70% 11.70% 11.70% 11.70% 11.70% 11.10% 10.50% 10.50% 10.50%Next portion of taxable income $15,000 $15,315 $15,575 $15,980 $16,268 $16,610 $16,925 $17,230 $17,574 $17645Applicable Rate 15.70% 13.70% 13.70% 13.70% 13.70% 13.70% 13.00% 12.29% 12.29% 12.29%On the amount over $85,000 $86,785 $88,260 $90,555 $92,185 $94,121 $95,909 $97,636 $99,588 $99,987Applicable Rate 16.70% 14.70% 14.70% 14.70% 14.70% 14.70% 14.70% 14.70% 14.70% 14.70% Source: Dayarayan centre of tax research 13
  14. 14. BC Combined Federal and Provincial Income Tax Rates for Income Earned by a Canadian- Controlled Private Corporation(CCPC) Active Business Small Business Income Income General Active Effective date Investment Income up to $400,000 between Business Income $400,000 and $500,000 01-Jan-08 15.5/14.5/13.5% - 31.5/30.5% 46.7/45.7% 01-Jan-09 13.50% 22.00% 30.00% 45.70% 01-Jan-10 13.50% 21.50% 28.50% 45.20% 01-Jan-11 13.50% 21.00% 26.50% 44.70% BC Provincial Income Tax Rates for Income Earned by a Canadian-Controlled Private Corporation(CCPC) Active Business Small Business Income Income General Active Effective date Investment Income up to $400,000 between Business Income $400,000 and $500,000 01-Jan-08 4.5/3.5/2.5% - 12/11% 12/11% 01-Jan-09 2.50% 11% 11% 11% 01-Jan-10 2.50% 10.50% 10.50% 10.50% 01-Jan-11 2.50% 10% 10% 10% 14
  15. 15. Small Business Income (SBI) Thresholds for Canadian-Controlled Private Corporations (CCPCs) 2008-2011 Description 2008 2009 2010 2011 Federal $400,000 $500,000 $500,000 $500,000 British Columbia $400,000 $400,000 $400,000 $400,000 Federal Personal Income Tax Rates / 2004-2010 Marginal Tax Rates Taxable Income Canadian Dividends Capital Gains Small Business Other Income Eligible Dividends Dividends 2004 2005 2006 2007 2008 2009 2010 2004 2005-2010 2004 2005-2010 2004 2005-2006 2007-2009 2010 2004 2005-2010first $35,000 first $35,595 first $36,378 first $37,178 first $37,885 first $40,726 first $40,970 8.00% 7.50% 3.33% 2.08% 3.33% 2.08% (5.75%) (4.28%) 16% 15.00%over $35,000 over $35,595 over $36,378 over $37,178 over $37,885 over $40,726 over $40,970up to $70,000 up to $71,190 up to $72,756 up to $74,357 up to $75,769 up to $81,452 up to $81,941 11.00% 11.00% 10.83% 10.83% 10.83% 10.83% 4.40% 5.80% 22% 22.00%over $70,000 over $71,190 over $72,756 over $74,357 over $75,769 over $81,452 over $81,941up to $113,804 up to $115,739 up to $118,285 up to $120,887 up to $123,184 up to $126,264 up to $127,021 13.00% 13.00% 15.83% 15.83% 15.83% 15.83% 10.20% 11.56% 26% 26.00%over $113,804 over $115,739 over $118,285 over $120,887 over $123,184 over $126,264 over $127,021 14.50% 14.50% 19.58% 19.58% 19.58% 19.58% 14.55% 15.88% 29% 29.00%Marginal tax rate for dividends is a % of actual dividends received (not grossed-up amount). Federal Basic Personal Amount Tax Rate 2004 2005 2006 2007 2008 2009 2010 2004 2005 & 2007-2010 2006 $8,012 $8,648 $9,039 $9,600 $9,600 $10,320 $10,382 16.00% 15.00% 15.25% 15
  16. 16. Source: Dayarayan centre of tax researchThe tax rate tables show the combined federal plus provincial/territorial marginal tax rate for 4 different types ofincome - the 2 types of Canadian dividends, capital gains, and all other income. The other income column showsthe actual tax rates for each tax bracket. A persons marginal tax rate is the tax rate that will be applied to the nextdollar earned.The marginal tax rates on capital gains and Canadian dividend income are lower than on other types of income,because:  only 50% of capital gains are included in taxable income  Either 125% or 145% of Canadian dividends are included in taxable income, but a dividend tax credit is deducted from taxes payable. See the Dividend Tax Credit page for more information.Other income includes income from employment, self-employment, interest from Canadian or foreign sources,foreign dividend income, etc.With some marginal tax rate tables, the marginal tax rate at $60,000 for dividends is the rate that would apply ifthere was no income besides dividend income. This is not the way our tax rate tables work.In our tables, the marginal tax rates for capital gains and dividends at any income level (say $60,000) are themarginal rates on the next dollar of actual capital gains or actual dividend income, if the taxpayer has $60,000 oftaxable income from sources other than dividends. 16
  17. 17. Example: the combined federal/BC marginal tax rate for a person earning $72,000 of employment income in 2009would be  32.5% for employment income  16.25% for capital gains  3.68% for eligible Canadian dividends  18.71% for Canadian small business dividendsEmployee does not pay GST/HST on taxable benefitsThe employee does not pay GST/HST you have to remit on taxable benefits. As explainedin previous chapters, an amount for GST/HST has already been added to the taxablebenefit reported on the employees T4 slip.Example 1: Remitting GST/HST on automobile benefits in a non-participating provinceAs a corporation registered for GST/HST, you buy a vehicle that is used more than 50% in commercial activitiesand is made available to your employee during 2009. The last establishment where the employee ordinarilyreported in the year for the corporation was located in Ontario.You calculated a taxable benefit (including GST and PST) of $4,800 on the standby charge and an operatingexpense benefit of $600. Your employee reimbursed you $1,800 for the automobile operating expenses within45 days following the end of 2009. You did not include this amount as a taxable benefit.You claimed an ITC for the purchase of the automobile and also on the operating expenses. Since the benefit istaxable under the Income Tax Act, and no situations described in the section Situations where we do not consideryou to have collected GST/HST apply, you calculate the GST remittance as follows: 17
  18. 18. Standby charge benefitTaxable benefit reported on T4 $4,800GST considered to have been collected on the benefit $4,800 × 4/104 = $184.62Operating expense benefitTaxable benefit reported on T4 $600Employees partial reimbursement of operating expenses $1,800Total value of the benefit $2,400GST considered to have been collected on the benefit $2,400 × 3% = $72.00Total GST to be remitted on the automobile benefit $256.62You are considered to have collected GST in the amount of $256.62 at the end of February 2010. You have toinclude this amount on your GST/HST return for the reporting period that includes the last day of February 2010.Example 2: Remitting GST/HST on automobile benefits in a participating provinceUsing the same facts as in Example 1, assume that the last establishment to which the employee ordinarily reportedin the year for the corporation was located in Nova Scotia. In this case, you would calculate the HST remittance asfollows:Standby charge benefitTaxable benefit reported on T4 $4,800HST considered to have been collected on the benefit $4,800 × 12/112 = $514.29Operating expense benefitTaxable benefit reported on T4 $600Employees partial reimbursement of operating expenses $1,800 18
  19. 19. Total value of the benefit $2,400HST considered to have been collected on the benefit $2,400 × 9% = $216.00Total HST to be remitted on the automobile benefit $730.29You are considered to have collected HST in the amount of $730.29 at the end of February 2010. You have toinclude this amount on your GST/HST return for the reporting period that includes the last day of February 2010.Example 3: Long service awardYou bought a watch for $560 (including GST/HST and PST) for your employee to mark the employees 25 years ofservice. You reported a taxable benefit of $560 in box 14 and under code 40 on the employees T4 slip.You could not claim an ITC because you bought the watch for the employees exclusive personal use andenjoyment. Since you cannot claim an ITC, you are not considered to have collected GST/HST and, as a result, youwill not have to remit GST/HST on the benefit.Example 4: Special clothingYou provided your employee with safety footwear designed to protect him or her from particular hazardsassociated with his or her employment. Since we do not consider the footwear to be a taxable benefit to theemployee for income tax purposes, you are not considered to have collected GST/HST on the footwear and you donot have to remit GST/HST. However, you can claim an ITC for any GST/HST you paid on the footwear. 19
  20. 20. Benefits ChartThis chart indicates whether the taxable allowances and benefits discussed in this guide are subject to CPP andEI withholdings, and shows which codes you should use to report them on the employees T4 slip. The chart alsoindicates whether GST/HST has to be included in the value of the taxable benefit for income tax purposes. Cashreimbursements and non-cash benefits are subject to GST/HST, unless they are for exempt or zero-rated supplies.Cash allowances are not subject to GST/HST.Taxable allowance or benefit CPP EI Code GST/HST Automobile and motor vehicle allowances yes yes 40 no Automobile standby charge and operating expense benefits yes no 34 yes [Note 1] Board and lodging, if cash earnings also paid in the pay period yes yes 30 [Note 1] Board and lodging, if no cash earnings paid in the pay period yes no 30 Cellular phone service – in cash yes yes 40 yes Cellular phone service – non-cash yes no 40 yes Child care expenses – in cash yes yes 40 yes Child care expenses – non-cash yes no 40 yes [Note 2] Counseling services – in cash yes yes 40 [Note 2] Counseling services – non-cash yes no 40 Disability-related employment benefits – in cash yes yes 40 yes 20
  21. 21. Disability-related employment benefits – non-cash yes no 40 yes Discounts on merchandise and commissions on sales yes no 40 yes Educational allowances for children yes yes 40 no Gifts and awards – in cash yes yes 40 no Gifts and awards – non-cash/near-cash yes no 40 yesGroup term life insurance policies: Employer-paid premiums yes no 40 no [Note 3] Housing, rent-free or low-rent – in cash yes yes 30 [Note 4] [Note 3] Housing, rent-free or low-rent – non-cash yes 30 Interest-free and low-interest loans [Note 5] yes no 36 no Internet service (at home) – in cash yes yes 40 yes Internet service (at home) – non-cash yes no 40 yes Meals – Overtime allowances yes yes 40 no Meals – Overtime – in cash yes yes 40 yes Meals – Overtime – non-cash yes no 40 yes Meals – Subsidized yes no 30 yes [Note 6] Medical expenses – in cash yes yes 40 [Note 6] Medical expenses – non-cash yes no 40 Moving expenses and relocation benefits – in cash yes yes 40 yes Moving expenses and relocation benefits – non-cash yes no 40 yes Moving expenses – non accountable allowance over $650 yes yes 40 no [Note 7] Municipal officers expense allowance yes no 40 no 21
  22. 22. Parking – in cash yes yes 40 yes Parking – non-cash yes no 40 yesPower saws and tree trimmers – rental paid by employer for employee-owned tools yes yes 40 yes Premiums under provincial hospitalization, medical care insurance, and certain yes yes 40 no federal government plans – in cash Premiums under provincial hospitalization, medical care insurance, and certain yes no 40 no federal government plans – non-cash [Note 8] Professional membership dues – in cash yes yes 40 [Note 8] Professional membership dues – non-cash yes no 40 Recreational facilities – in cash yes yes 40 yes Recreational facilities – non-cash yes no 40 yes Recreational facilities – club membership dues yes no 40 yes Registered retirement savings plan (RRSP) contributions yes yes 40 no [Note 8] Registered retirement savings plan (RRSP) administration fees yes no 40 Scholarships and bursaries yes yes 40 no [Note 9] Security options yes no 38 no Social events – in cash yes yes 40 no Social events – non-cash yes no 40 yes Spouse or common-law partners travelling expenses – cash allowance yes yes 40 no Spouse or common-law partners travelling expenses – non-cash yes no 40 yes Tax-Free Savings Account – contributions yes yes 40 no [Note 10] Tax-Free Savings Account – administration fees yes no 40 22
  23. 23. Tool allowance yes yes 40 no Tool reimbursement yes yes 40 yes Transit passes – in cash yes yes 40 yes Transit passes – non-cash yes no 40 yes Transportation to and from the job – in cash yes yes 40 yes Transportation to and from the job – non-cash yes no 40 yes [Note 11] Travel assistance in a prescribed zone yes yes 32 yes Travelling allowances to a part-time employee and other employees yes yes 40 no [Note 10] Tuition fees – in cash yes yes 40 [Note 10] Tuition fees – non-cash yes no 40 Uniforms and special clothing – in cash yes yes 40 yes Uniforms and special clothing – non-cash yes no 40 yes Wage-loss replacement or income maintenance non-group plan premiums yes no 40 noNotes1 The rent portion of the lodging benefit is subject to GST/HST if the dwelling is occupied for less than one month; the utility portion is subject to GST/HST unless municipality supplied.2 Certain counseling services are subject to GST/HST. If the services you pay are subject to GST/HST, include the GST/HST in the value of the benefit.3 The rent portion of the housing benefit is subject to GST/HST if the dwelling is occupied for less than one month; the utility portion is subject to GST/HST unless municipality supplied.4 If it is a non cash benefit, it is insurable if it is received by the employee in addition to cash earnings in a pay period. If no cash earnings are paid in the pay period, it is not insurable. 23
  24. 24. 5 Enter the home relocation loan deduction under code 37. 6 Some medical expenses are subject to GST/HST. For more information,. 7 Enter the exempt amount under code 70. 8 Certain fees are subject to GST/HST. If the fees you pay are subject to GST/HST, include it in the value of the benefit. 9 Enter the amount of the security options deduction under code 39 or 41, as applicable.10 Certain fees are subject to GST/HST. If the fees you pay are subject to GST/HST, include it in the value of the benefit.11 Enter the amount of medical travel assistance under code 33. (Source: Employers Guide Taxable Benefits and Allowances 2009) 24
  25. 25. Total average household expenditure by province 2007 2008 2007 to 2008 $ % change Canada 69,950 71,360 2.0 Newfoundland and Labrador 55,010 57,710 4.9 Prince Edward Island 55,570 58,710 5.7 Nova Scotia 59,990 60,330 0.6 New Brunswick 58,210 58,440 0.4 Quebec 57,310 60,480 5.5 Ontario 76,650 77,310 0.9 Manitoba 63,300 63,510 0.3 Saskatchewan 63,940 68,280 6.8 Alberta 85,910 86,910 1.2 British Columbia 72,620 73,120 0.7 Average total expenditure and shares of spending of major categories for provinces, 2008 Average household spending Food Shelter Clothing Transportation Personal taxes2 $ Shares of spending1(%) Canada 71,360 10.4 19.9 4.0 13.6 20.5 Newfoundland and Labrador 57,710 11.7 16.5 4.7 15.6 18.0 Prince Edward Island 58,710 11.5 19.0 3.6 15.2 16.2 Nova Scotia 60,330 11.3 18.6 3.7 14.7 17.9 New Brunswick 58,440 11.2 17.2 3.5 17.0 17.8 Quebec 60,480 12.2 18.5 3.9 13.2 20.5 Ontario 77,310 9.7 21.2 4.2 13.1 21.2 Manitoba 63,510 10.2 18.2 3.9 14.3 18.8 Saskatchewan 68,280 9.2 17.2 3.8 16.0 19.1 Alberta 86,910 8.9 19.0 3.8 14.0 21.9 British Columbia 73,120 10.9 20.8 4.0 13.8 18.71.Shares of spending represent the proportions of total average household spending.2.Percentage of spending on personal taxes depends on provincial and federal income tax rates as well as household income distribution. 25
  26. 26. GST/HST Notices-Notice 246December 2009Source: http://www.cra-arc.gc.ca/E/pub/gi/notice246/notice246-e.htmlHarmonized Sales Tax for British Columbia – Questions and Answers on HousingRebates and Transitional Rules for Housing and Other Real Property Situated inBritish ColumbiaNOTE: This notice replaces the earlier version dated October 2009 and entitledHarmonized Sales Tax – Questions and Answers on Transitional Rules for Non-Residential Real Property Situated in British Columbia. It has been revised to addand update the questions and answers following a recent information noticereleased by the Government of British Columbia that addresses the transitionalrules for residential real property.On July 23, 2009, the Government of British Columbia announced its plans to implement aHarmonized Sales Tax (HST), which, subject to legislative approval by the British Columbia(B.C.) legislature, would come into effect on July 1, 2010, and be administered by theCanada Revenue Agency (CRA).This publication provides questions and answers that reflect the proposed tax changes asannounced in the Ministry of Finance Tax Information Notices, HST Notice #1 GeneralTransition Rules for British Columbia HST issued by the Government of British Columbia on 26
  27. 27. October 14, 2009 and HST Notice #3 Residential Housing – New Housing Rebates andTransitional Rules for British Columbia HST issued by the Government of British Columbiaon November 18, 2009.Any commentary in this publication should not be taken as a statement by the CRA thatthese proposed changes will be enacted in their current form.Table of Contents • Residential real property o General o Application of the HST to new housing o Grandparented sales of housing  Assignment of purchase and sale agreements for grandparented housing  Resellers of housing – Sales of housing purchased on a grandparented basis by a first reseller  Resellers of housing – Sales of housing purchased on a grandparented basis by a subsequent reseller  Self-assessment requirements o New housing rebates o Provincial sales tax (PST) transitional new housing rebates o Transitional tax adjustment for houses and residential condominiums o Application of the HST to new rental housing o New residential rental property rebates o Builders disclosure requirements o Resellers disclosure requirements • Non-residential real property 27
  28. 28. o Sales of non-residential real property o Leases of non-residential real property  General rule o Progress payments o Holdbacks • Additional questions and answers related to real propertyResidential real propertyNote: For purposes of this document, the word house means both the building and landportions of the house, unless otherwise specified. In applying the arms length test in thisnotice, aunts and uncles would be considered to be related to their nieces and nephews. Aspecified related party is any person who is not dealing at arms length with, or who is aperson associated with, the original builder. Associated is defined in section 127 of theExcise Tax Act.GeneralWhat is the current provincial sales tax (PST) treatment for new housing in B.C.?For information relating to the current application of the PST in B.C., you may visit theGovernment of British Columbia Web site at www.gov.bc.ca, call 604-660-4524 if you arelocated in Vancouver or 1-877-388-4440 toll-free elsewhere in B.C., or send yourquestions by email to CTBTaxQuestions@gov.bc.ca. 28
  29. 29. 1. What is the proposed treatment for sales of residential housing in B.C. under aharmonized sales tax (HST)?The HST at 12%, composed of a federal part at 5% and a provincial part at 7%, wouldapply to a builders sale of a newly constructed or substantially renovated residentialcomplex, including a multiple unit residential complex (e.g., an apartment building). Thesale of housing that has been previously occupied by an individual as a place of residenceand that is exempt from GST would also be exempt for purposes of the HST. Thedefinitions in the Excise Tax Act that relate to housing (e.g., builder, residential complex,residential unit, residential condominium unit, substantial renovation) and the CRAscurrent policies regarding the application of the GST to housing, would generally applyunder the HST.2. I am selling my house and the sale is exempt from GST. If the closing date forthe sale of my house is after June 2010, would the sale of the house be exemptunder the HST?Yes. The sale of your previously occupied house would be exempt under the HST and youwould not be required to charge or collect the HST.3. I am a builder and I am registered for GST/HST purposes. I currently claiminput tax credits (ITCs) for the 5% GST that I pay on the lumber I purchase tobuild new houses. Would I be able to claim ITCs for the 12% HST paid on lumberpurchased after June 2010?Yes. You would be able to claim an ITC for the 12% HST paid on your purchase of lumberand other construction materials that you use to construct new housing. 29
  30. 30. Application of the HST to new housing5. When would the HST apply to a sale of a residential complex?Generally, the HST would apply to a builders taxable supply by way of sale of a newlyconstructed or substantially renovated residential complex where both ownership andpossession of the complex are transferred to the purchaser under the agreement for thesupply after June 2010. If either ownership or possession is transferred to the purchaserbefore July 2010, the HST would not apply.This general rule applies to sales of all housing types, including residential condominiumunits, mobile homes and floating homes. An exception exists for certain types of housing if,among other conditions, a written agreement of purchase and sale was entered into on orbefore November 18, 2009 – see the section below on grandparented sales of housing.The HST would generally be payable on the earlier of the day ownership or possession ofthe residential complex is transferred to the purchaser. In the case of a residentialcondominium unit, if possession of the unit is transferred before the condominium hasbeen registered under the Strata Property Act [S.B.C. 1998], the HST would generallybecome payable on the earlier of the day ownership of the unit is transferred or the daythat is 60 days following the date of registration.6. A builder and a purchaser enter into a written agreement of purchase and salein December 2009 for a newly constructed house. The agreement provides thatownership and possession of the house will transfer to the purchaser on July 14,2010. The builder is not a reseller. Would the HST apply to the sale? 30
  31. 31. Yes. Since the written agreement of purchase and sale is entered into after November 18,2009, and both ownership and possession of the house transfer to the purchaser after June2010, the HST at 12% would apply to the sale. If the construction of the house is at least10% complete as of July 1, 2010, the purchaser would be entitled to claim a PSTtransitional new housing rebate – see the section below on PST transitional new housingrebates. The purchaser may also be entitled to claim a GST new housing rebate in respectof the federal part of the HST and a B.C. new housing rebate in respect of the provincialpart of the HST provided that all of the conditions for each of these rebates are met– seethe section below on new housing rebates. For more information on resellers, see thesection below on resellers of housing.7. When would the HST not apply to a sale of a newly constructed or substantiallyrenovated residential complex?Generally, the HST would not apply to a builders taxable supply by way of sale of a newlyconstructed or substantially renovated residential complex where either ownership orpossession of the complex is transferred, under a written agreement of purchase and sale,to the purchaser before July 2010, regardless of when the purchase and sale agreementwas entered into. However, GST at 5% would apply.The HST would also not apply if the sale of the newly constructed or substantiallyrenovated residential complex is grandparented – see the sections below on grandparentedsales of housing and resellers of housing. However, GST at 5% would apply to the sale ofthe complex.8. A builder and a purchaser enter into a written agreement of purchase and saleon December 3, 2009 for a newly constructed house. The agreement provides 31
  32. 32. that ownership and possession of the house will transfer to the purchaser in May2010. Would the HST apply to the sale?No. If ownership or possession (or both) of the house transfers to the purchaser inaccordance with the written agreement before July 2010, the HST would not apply.However, the GST at 5% would apply to the sale of the house.9. I entered into a written agreement of purchase and sale for a newlyconstructed house with a builder on June 5, 2009. I take ownership andpossession of the house, in accordance with the agreement, in May 2010. Wouldthe HST apply to the sale?No. If ownership or possession (or both) of the house transfers to you in accordance withthe written agreement before July 2010, the HST would not apply, regardless of when thepurchase and sale agreement was entered into. However, the GST at 5% would apply tothe sale of the house.9.1 I entered into a written agreement of purchase and sale in December 2009 fora newly constructed residential condominium unit. The agreement provides thatpossession of the unit will transfer to me in May 2010 but ownership will only betransferred after July 1, 2010, following the registration of the condominiumcomplex. Would the HST apply to the sale?No. If ownership or possession (or both) of the residential condominium unit transfers toyou in accordance with the written agreement before July 2010, the HST would not apply.However, the GST at 5% would apply to the sale of the residential condominium unit.Grandparented sales of housing 32
  33. 33. 10. What is a grandparented sale of a house?Where a written agreement of purchase and sale for a newly constructed or substantiallyrenovated detached house, semi-detached house, attached house, residential condominiumunit or condominium complex was entered into on or before November 18, 2009, the salewould generally be grandparented if both ownership and possession of the housing transferto the purchaser, under the agreement, after June 2010. In this case, the provincial part ofthe HST would not be payable on the sale. Only the federal part of the HST would apply,i.e., the sale would be subject to the GST at 5%. In the case of a detached house,semi-detached house or attached house, the purchaser must be an individual in order forthe grandparenting rule to apply. In the case of residential condominiums, thegrandparenting rule would apply to all purchasers, including individuals.While a grandparented sale of housing is not subject to the HST, the builder would berequired to remit a transitional tax adjustment if the construction straddles theJuly 1, 2010 implementation date and the construction is less than 90% complete as ofJuly 1, 2010. The transitional tax adjustment is intended to approximate the amount of thePST that would have been paid in respect of the construction costs incurred after June2010 – see the section below on the transitional tax adjustment for houses and residentialcondominiums.For information on the assignment of a purchase and sale agreement for a grandparentedhouse, see the section below on assignments of purchase and sale agreements forgrandparented housing.For information on resellers of housing, see the sections below on resellers of housing.11. Are there any exceptions to the grandparenting rule? 33
  34. 34. Yes. For example, newly constructed or substantially renovated houses built by owners fortheir personal use, as well as duplexes, traditional apartment buildings, mobile homes andfloating homes would not be grandparented under the transitional rules for purchases ofnew housing, as the transitional rules would apply differently to these houses.Modular homes are considered to be mobile homes for GST/HST purposes provided theymeet certain criteria including that the manufacture or assembly of the modular home issubstantially completed prior to being moved to a site. For more detailed information referto GST/HST Policy Statement P-223, Meaning of manufacture or assembly of which iscompleted or substantially completed in the definition of mobile home.Reference should also be made to the sections below on assignments of purchase and saleagreements for grandparented housing and on resellers of housing.12. I entered into a written agreement of purchase and sale for a new house witha builder on October 31, 2009. I take ownership and possession of the house, inaccordance with the agreement, in August 2010. The builder is not a reseller.Would the HST at 12% apply to the sale?Generally, no. The purchase of the house would normally be grandparented since thewritten agreement of purchase and sale was entered into on or before November 18, 2009and both ownership and possession of the house are transferred after June 2010. However,the sale of the house would be subject to the GST at 5%.13. I am a builder and I am registered for GST/HST purposes. I am constructing a housewhose sale would be grandparented and the construction of this house straddles the July 1,2010 implementation date for the HST. Would I be able to claim ITCs for the HST paid on 34
  35. 35. lumber and other construction materials purchased after June 30, 2010 that will be used tocomplete the construction of this grandparented house?Yes. Even if the sale of the house would normally be grandparented, you would be entitledto claim ITCs for the 12% HST paid on the lumber and other construction materials used inthe construction. If the construction of the house is less than 90% complete as ofJuly 1, 2010, you would be required to account for a transitional tax adjustment incalculating your net tax remittance – see the section below on transitional tax adjustmentfor houses and residential condominiums.14. After entering into a written agreement of purchase and sale on November 1,2009 for a newly constructed house, the purchaser requests that upgrades bemade to the house. Ownership and possession of the house will transfer to thepurchaser under the agreement on September 10, 2010. The builder is not areseller. Would the HST apply to the additional amount payable for the upgrades?Upgrades to a house will generally result in modifications to the existing agreement suchthat the upgrades form part of the written agreement for the purchase and sale of thehouse. In such a case, the tax applicable to the purchase of the house would prevail. Inthis case, since a written agreement of purchase and sale was entered into on or beforeNovember 18, 2009, and ownership and possession will transfer to the purchaser afterJune 2010, the HST would not apply. However, the GST at 5% would apply on the totalamount payable for the house, including the amount payable for the upgrades.Where an existing agreement of purchase and sale is modified, varied or otherwisematerially altered to such an extent that it is considered to be a new agreement, theapplication of the transitional rules will be based on the date that the new agreement is 35
  36. 36. entered into. Reference should be made to GST/HST Policy Statement P-249, Agreementsand Novation.If a purchaser and a builder renegotiate the terms of a written agreement of purchase andsale for new housing, that was entered into on or before November 18, 2009, and enterinto a new agreement after November 18, 2009, the transitional rules would apply basedon the date that the new agreement was entered into.14.1 After entering into a written agreement of purchase and sale for a newlyconstructed house on October 10, 2009 for a house that is to be built on lot 22,the purchaser and the builder renegotiate the terms of the agreement onNovember 25, 2009, such that the house will now be built on lot 8 as opposed tolot 22. Ownership and possession will transfer to the purchaser under this newagreement on July 15, 2010. Would the HST apply to the sale of the house?Yes. The HST at 12% would apply to the sale of the house since the written agreement ofpurchase and sale for the house is entered into after November 18, 2009, and bothownership and possession are transferred after June 2010. The transitional rules wouldapply based on the new agreement entered into on November 25, 2009 in respect of thehouse to be constructed on lot 8.Assignment of purchase and sale agreements for grandparented housing14.2 A builder (referred to as the "original builder") and a purchaser enter into awritten agreement of purchase and sale for a newly constructed residentialcondominium unit on October 4, 2009. In accordance with the agreement ofpurchase and sale for the condominium unit, ownership and possession of theunit will transfer to the purchaser on July 15, 2010. Would the HST apply to the 36
  37. 37. sale of the condominium unit if the purchaser assigns its rights under theagreement to a third party?Generally, no. Where a written agreement of purchase and sale for a grandparentedhousing is assigned to a third party (assignee), the housing will remain grandparentedprovided that the assignee receives ownership and possession of the grandparentedhousing from the original builder, under the agreement with the original builder, after June2010 and: • there is no novation of the agreement; • the purchaser and the original builder are dealing at arms length or are not associated; and • the original builder or a specified related party does not acquire or reacquire by way of sale any legal or beneficial interest in the housing.Where all of the above conditions are met, the sale of the residential condominium unitfrom the original builder to the assignee would be grandparented since the writtenagreement of purchase and sale was entered into on or before November 18, 2009 andboth ownership and possession of the condominium unit are transferred after June 2010.As such, the HST would not apply. However, the sale of the condominium unit would besubject to the GST at 5%.14.3 After entering into a written agreement of purchase and sale on October 1,2009 for a newly constructed house with a builder (referred to as the "originalbuilder"), the purchaser who is an individual assigns its rights under thepurchase and sale agreement to an unrelated third party (assignee) for $10,000on December 15, 2009. In accordance with the agreement of purchase and sale 37
  38. 38. for the house, ownership and possession of the house will transfer to thepurchaser/assignee from the original builder on July 15, 2010. There is nonovation of the agreement. The original builder and the purchaser are notassociated and are dealing at arms length. Would the assignee be required topay the HST on the purchase of the house? Would the assignee be required to paythe HST to the purchaser on the $10,000 paid in accordance with the assignmentagreement entered into on December 15, 2009?The sale of the house by the original builder would remain grandparented since theconditions for grandparenting when there is an assignment of a purchase and saleagreement are met, and the written agreement of purchase and sale was entered into onor before November 18, 2009 with both ownership and possession of the house beingtransferred after June 2010. As such, the HST would not apply on the purchase of thehouse from the original builder. However, the sale of the house would be subject to theGST at 5%.The $10,000 paid under the assignment agreement is consideration paid for an interest inthe house supplied by the purchaser to the assignee. For GST/HST purposes, the supply ofan interest in real property is a supply of real property. If the purchaser is a builder forGST/HST purposes, the supply would be subject to the GST/HST. However, sinceownership of the interest transfers to the purchaser under the assignment agreement onDecember 15, 2009, the HST would not apply. The GST at 5% would apply to the $10,000paid to the purchaser.Resellers of housing – Sales of housing purchased on a grandparented basis by afirst reseller 38
  39. 39. 14.4 A builder (referred to as the "original builder") and a purchaser enter into awritten agreement of purchase and sale for a newly constructed residentialcondominium unit on October 4, 2009. In accordance with the agreement ofpurchase and sale for the condominium unit, ownership and possession of theunit will transfer to the purchaser on July 15, 2010. If the purchaser resells thecondominium unit, would the HST apply to the sale of the condominium unit?A first reseller is the first purchaser that enters into a written agreement of purchase andsale for grandparented housing with the original builder. Where the sale of the housing bythe first reseller is taxable for GST purposes, the HST would not apply to the sale (i.e., thesale of the housing would be grandparented) if all of the following conditions are met: • the first reseller obtained possession of the housing from the original builder after the construction or substantial renovation was substantially completed; • the original builder and the first reseller are dealing at arms length and are not associated; • the first reseller: o is a builder of the housing only because of paragraph (d) of the definition of "builder" in the Excise Tax Act, or o is a builder of the housing only because of paragraphs (b) and (d) of the definition of "builder" in the Excise Tax Act and the construction or renovation completed by the first reseller is not greater than 10% of the total construction or substantial renovation that was completed when the housing was sold by the first reseller; and 39
  40. 40. • the original builder or a specified related party does not acquire or reacquire by way of sale any legal or beneficial interest in the housing.In this case, the purchaser is a first reseller of the residential condominium unit. Where allof the above conditions are met, the HST would not apply to the sale of the residentialcondominium unit by the first reseller. However, the sale of the condominium unit wouldbe subject to the GST at 5%.See question 54.1 for information on the disclosure requirements for resellers.14.5 A builder (referred to as the "original builder") and a purchaser who is anindividual enter into a written agreement of purchase and sale for a newlyconstructed house on October 18, 2009. In accordance with the agreement ofpurchase and sale for the house, ownership and possession of the house willtransfer from the original builder to the purchaser on July 15, 2010. Thepurchaser acquires the house for resale. The construction of the house issubstantially completed on July 10, 2010. The purchaser does not complete anyof the construction. The original builder and the purchaser are not associated andare dealing at arms length. On July 20, 2010, the purchaser sells the house to anunrelated third party. The house has not been occupied by an individual. Wouldthe sale of the house to the third party be subject to the HST?No. The purchaser is a first reseller of the house. As such, the sale of the house by the firstreseller would not be subject to the HST since the conditions for grandparenting in the caseof a first reseller are met and the original written agreement of purchase and sale for thehouse was entered into on or before November 18, 2009 with both ownership and 40
  41. 41. possession of the house being transferred under the agreement after June 2010. The saleof the house to the unrelated third party would be subject to the GST at 5%.For information on disclosure requirements for resellers, see question 54.1.14.6 Where the HST applies to a sale of a house that was purchased on agrandparented basis by a first reseller, would the first reseller be entitled toclaim an ITC or a rebate to recover the transitional tax adjustment and/or PSTthat may be embedded in the amount paid by the first reseller to purchase thehouse?Yes. Where the HST applies to the sale of the house by the first reseller, the first resellerwould be entitled to claim an ITC or a rebate equal to 2% of the consideration paid by thefirst reseller to purchase the house from the original builder on a grandparented basis. Theamount of the ITC or rebate represents the estimated PST and/or the transitional taxadjustment amount considered to be collected by the original builder and embedded in theprice paid by the first reseller to purchase the house.14.7 A builder (referred to as the "original builder") and a purchaser, who is anindividual, enter into a written agreement of purchase and sale for a newlyconstructed house on October 18, 2009 for $400,000. In accordance with theagreement of purchase and sale for the house, ownership and possession of thehouse will transfer from the original builder to the purchaser on July 15, 2010.The purchaser is a GST/HST registrant who acquires the house for resale. Theconstruction of the house is substantially completed on July 10, 2010. Thepurchaser does not complete any of the construction. The original builder and thepurchaser are associated. On July 20, 2010, the purchaser sells the house to an 41

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